The Problem, and the False Solution

Mark Steyn makes an interesting—indeed, vitally important—point about government spending. The Left is always keen on telling us that we are under-taxed, or that the "rich" aren’t paying their fair share, or some such nonsense. We’ve argues long and hard here that what we face is not a revenue problem, but a spending problem. Mr. Steyn pithily sums up an important bit of evidence for that assertion.

The total combined wealth of the Forbes 400 richest Americans is $1.5 trillion. So, if you confiscated the lot, it would barely cover one Obama debt-ceiling increase.

That’s really the problem in a nutshell. This week, the President asked for a $1.2 trillion debt increase. We could pay for it, I suppose, by confiscating all the wealth of the Forbes 400, and have a nice $300 billion left over…but there won’t be too many people left that we can soak to cover the next debt ceiling increase. Also, as a point of academic interest, President Obama’s debt ceiling increase is $200 billion more than the entire national debt was in 1980.

To the extent we do have a revenue problem, perhaps it’s not that the rich pay too little, but rather that the poor do. 47% of American’s don’t pay any income tax at all. Which means that the "soak the rich" argument can really be boiled down to the 47% of Americans that don’t pay income taxes think the remaining 53% aren’t paying their fair share.

Well, someone isn’t, at any rate.

At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done. Our most enlightened citizens think it’s rather vulgar and boorish to obsess about debt. The urbane, educated, Western progressive would rather "save the planet," a cause which offers the grandiose narcissism that, say, reforming Medicare lacks.

And reforming Social Security, while we’re at it. Which we aren’t. And which, combined, will eat up the entire Federal budget in the not-too-distant future.

Something that can’t go on forever, won’t. It’d be great to have a first-class military, generous Medicare and Social Security benefits. Along with all the rest of the coddling state that supports in the grand manner to which we’ve become accustomed. But the future won’t allow us to be that generous. You see, we’re heading to a $16.5 trillion national debt, because, instead of being prudent with our money in order to meet all those future obligations, we blew it.

We spent money we didn’t have to build carrier groups and JDAMs, No Child left Behind and Medicare Part D. At the current rate, the federal government will, sometime this century, consist of a single department that does nothing but collect taxes and issue Social Security checks, because there won’t be one red cent left over for Defense, Justice, State, Commerce, Agriculture, or Treasury. And, we probably won’t be able to afford even that.

Mainly, because we won’t be able to produce much of anything.

Last January, the BBC’s Brian Milligan inaugurated the New Year by driving an electric Mini from London to Edinburgh, taking advantage of the many government-subsidized charge posts en route. It took him four days, which works out to an average speed of 6 mph — or longer than it would have taken on a stagecoach in the mid-19th century. This was hailed as a great triumph by the environmentalists. I mean, c’mon, what’s the hurry?

What indeed? In September, the 10th anniversary of a murderous strike at the heart of America’s most glittering city was commemorated at a building site: The Empire State Building was finished in 18 months during the Depression, but in the 21st century the global superpower cannot put up two replacement skyscrapers within a decade.

The 9/11 memorial museum was supposed to open on the 11th anniversary, this coming September. On Thursday, Mayor Michael Bloomberg announced there is "no chance of it being open on time." No big deal. What’s one more endlessly delayed, inefficient, over-bureaucratized construction project in a sclerotic republic?

This is—as hard as it may be to believe—the same country that, in 1940, had an army smaller than Rumania, and by 1945, had the military power to, had we wanted, rule the globe. Now, we’re the country that can’t replace the World Trade Center in 10 years. This is not emblematic of a can-do country with the willingness to attack and solve problems with a vengeance.

But the president thinks that if we can only tax millionaires more, we can fix this place up quick.

I think the competing “fair share” memes are the most extreme area of the right and left talking past each other. When a liberal hears (for the millionth time) that 47% of Americans don’t pay income taxes, they hear sophistry (a lie using the truth). While it is true that 47% of Americans don’t pay what is specifically defined as income taxes, we know that that 80% of Americans pay federal taxes (payroll taxes) and those that don’t are generally the elderly, disabled, and families who earn less than $25k per year. At the same time, the top 400 you refer to pay an average of .000052% in payroll taxes, compared with a 15.62% for Americans earning under $100k. Federal taxes are federal taxes, money taken involuntarily to pay for something(s) that a person may or may not agree with paying for. Separating them for the purpose of arguing that people are not contributing is the worst kind of class warfare because it targets those that can least afford to pay more by falsely implying they don’t pay at all.

@CaptinSarcastic But I LOVE your sophistry, wherein you accuse others of sophistry for stating a simple fact.

To get there, you have to whistle past the lie that SS extractions are “contributions” for retirement, dedicated to that purpose.

You have to run past the lie that fuel taxes are “use taxes” which are dedicated to a purpose.

People SHOULD pay for their government, and 47%+ DO NOT. Your ignorance on the subject is exposed when you make it a “class warefare” argument. Many of those not paying income taxes are NOT POOR, you sanctimonious prig.

@Ragspierre Wait a second, you are saying that I am committing sophistry for not repeating what you accurately define as a lie, the narrative that describes taxes other than income taxes as contributions? How does that work?
As to those who do not pay income taxes, there are certainly examples of people who are not poor who manage to avoid income taxes, but they are barely represented among the 47% figure quoted. The main reason people pay zero income taxes is that they have lower incomes. Nice shot out of the gate going for the insult, especially considering I noted the sophistry on each side. I guess you are not going to call me a nice name for the other comment?

@Ragspierre There are just over 100,000 tax filers who earn between $200k and $2M that have zero income tax liability, all quite thankful to the policies that allowed them to legally do this, and I am as opposed as anyone to this kind of freeloading. But the fact remains that 100,000 people is a tiny, tiny fraction of the whole 47% who have no income tax liability. When you complain about the 47% who don’t pay income taxes specifically, you are complaining about lower income people. If you want to complain about the 100,000 high earners whoget this benefit thanks to Republican policies, and lobbying dollars, you are welcome to join me in that complaint.
I have always felt that it is better to try and show that someone is wrong than call them a name to define them as wrong, clearly you disagree.

@Ragspierre Two whole income quintiles would be 40% and the lowest two are obviously included and obviously make up the bulk of people who do not pay income taxes. There are certainly people between the lowest two quintiles and the highest quintile who pay no federal income taxes, but 83% of people with zero income liability are in the lowest two quintiles earning less than $33k per year. About 12% of filers with no income tax liability are in the middle quintile, earning between $33k and $59k. About 3.2% of people with no income liability are in the top two quintiles.
So tell me again how you are not talking about low income people when you echo the 47% number of which about 95% earn well below the median income, and most less than half the median income?
I can show you a lovely graphic if you’d like? http://graphics8.nytimes.com/images/2011/06/28/business/28economist-bartlett2/28economist-bartlett2-blog480-v2.jpg

@Ragspierre I welcome any discussion about people who earn above the median and still don’t pay federal taxes, and I hear you loud and clear that this is who YOU are talking about when you say that it is not just the poor who don’t pay income taxes. But again, I responded to the use of the 47% statistic, of which 95% are lower income people.
If the statistic were different, for example if Dale had said that 5% of Americans who earn greater than the median income do not pay federal income taxes, then HE would not have been talking about the poor. But that’s not what he did, is it? He referred to the 47%. of which the VAST majority are poor.
The only thing you have exposed is you misunderstanding of who Dale referred and who makes up the 47% of people who do not pay income taxes.

@timactual @Ragspierre Scroll right up and you can see it… “On the other hand, when liberals say that the rich don’t pay their fair share by (correctly) quoting the 15% rate paid by many hedge fund managers, the right correctly hears sophistry because most very high income earners pay a much higher rate than hedge fund managers.
In any case, our problem is not right vs. left or too much taxes vs. too much spending, our problem is a broken government that makes policies based on how the political campaign system is funded. Complexity, picking winners, and extenders is a guarantee of continued campaign contributions.
What could Congress critters hold over the heads of lobbyist clients if tax policy were simple and permanent? What would lobbyists do if there were no tax policy complexity to pay to have tinkered with?”

@timactual @Ragspierre It is a bit frustrating. Comments are all over the place. My comment was intended to be on one post, but it was too long (another format issue), so I put the sophistry of the right in one comment and the sophistry of the left in another. Oh well, at least we have more than 140 characters.

@CaptinSarcastic
” we know that that 80% of Americans pay federal taxes (payroll taxes) and those that don’t are generally the elderly, disabled, and families who earn less than $25k per year”

Speaking of sophistry, payroll taxes are paid by anyone who earns money, even if it is less than $25K per year. Also, since 80% is not 47%, it is pretty obvious that different taxes are being talked about.

@timactual Hey Tim, glad to see you are still around! Payroll taxes are not paid by everyone who earns money, only a specificly defined income category pays payroll taxes, that is “earned income”. Some people, especially older people, have an income, but are not required to pay payroll taxes. My point is that saying 47% of people pay no income taxes ignores that 80% of Americans pay federal taxes, and while some high earners pay lots of income taxes and virtually no payroll taxes (top 400 average is .000052%), some Americans pay 16% in payroll taxes and no income tax. To say they don’t pay income taxes as a rhetorica device to imply they don’t pay taxes strikes me as disingenuous. Just like income taxes, it’s not like they have a choice in the matter. This my accurate point, a federal tax is a federal tax.
Let’s say I called taxes on income up to $100k a “payroll tax”, but I called taxes on income above that a “income tax” but all the money went to the same place. You could say, and be semantically accurate, that only people over $100k pay income taxes, but you would still be committing a sophistry. And don’t even think about telling me that payroll taxes are “contributions” when $2.6Trillion of payroll tax dollars have gone to pay general fund expenses.

On the other hand, when liberals say that the rich don’t pay their fair share by (correctly) quoting the 15% rate paid by many hedge fund managers, the right correctly hears sophistry because most very high income earners pay a much higher rate than hedge fund managers.
In any case, our problem is not right vs. left or too much taxes vs. too much spending, our problem is a broken government that makes policies based on how the political campaign system is funded. Complexity, picking winners, and extenders is a guarantee of continued campaign contributions.
What could Congress critters hold over the heads of lobbyist clients if tax policy were simple and permanent? What would lobbyists do if there were no tax policy complexity to pay to have tinkered with?

@The Shark I think I defined one example of people not paying their fair share, the example of people making hundreds of millions of dollars in income and paying a 15% rate. I am not 15% can’t be a fair rate, but I don’t think it is seriously arguable that it is a fair rate when other people making the same amount or 1/1000 are paying closer to 30% of their income in taxes. We could define “fair share” in a couple of ways, one being having a consistent rate for people of similar income, or, if you oppose progressive taxation entirely, a rate which is different than the rate of anyone else. I know I lose the argument if I try to say that rich people as a group don’t pay their fair share since even the same rate on a higher income would be a greater contribution to the tax base than a lower income would make.
The fact is that total federal taxes on people below median income have gone UP in the last 30 years, and yet total federal taxes as a percentage of GDP has gone down from nearly 20% of the GDP to below 15% of the GDP. So do the math, who is paying more and who is paying less of the total bill?

There is a way out of this, but it is a very narrow path at first, and would require good faith from people who don’t have any, like Obama and his crew.

Social Security should be bought out, as Milton Friedman suggested. But the key thing will be growth. That will involve a lot more than lowering taxes as the supply siders always urge. I will not call what has to be done with government regulation “regulatory reform.” It will have to be regulatory disarmament. Especially in the energy sector, but also in manufacturing, and in labor. The cost of hiring a worker is ridiculous in this country, and I don’t mean the salary. And, of course, Obamacare must go. It must be killed whether he goes or not, and there must be a strategy for killing it if he is re-elected (which he will be if Romney is the Republican nominee: he is the least electable of the already marginally viable field).

But the key to getting out of this is to get to 19th Century growth rates. Burgeoning, cascading growth with full market forces disciplining the inevitable bubbles. No more Fannie-Freddie Coward-Pliven bubbles.

Also, no more pretending that what we have with China is free trade. It’s not.

A vital thing to realize is that world socialism, in power here with the Obama-Soros gang, is determined to feed off of the global explosion in productivity. That’s one of the reasons, the main reason really, that here at home, in the midst of plenty, we cannot create wealth now. The feeding tubes (Stimulus, QEs, Dodd-Frank, Obamacare, regulatory assault) are being beta-tested right here in the U.S., which will wind up a discarded corpse if this wretched bunch has anything to do with it. An American resurgence is anathema to world socialism. Beware, also, “Democracy,” as you now seeing it practiced in Egypt, for instance. That’s just a sucker punch opening the door to the next mob to take over, with the approval of the mob.

@martinmcphillips If only someone were in charge enough to be able to put actual ideological policies, whether they be liberal or conservative, we’d have a chance. None of that matters, the lobbyists and special interests are insuring that policies bend to their will, not the interests of the citizenry.
We are doing the legislative business of the lobbyists, but only enough to keep them coming back for more, never enough to actually make their clients happy, otherwise, what would pols use to get the next round of campaign contributions.
I’ll take honest conservative legislation without lobbyist influence in a second over the current system of big talk and bad law. We won’t get good policies until or unless we change what motivates our government. Pols spend between 30% and 70% of their time fundraising. Do you think for a second that the things that they actually DO serve anyone but the people to whom they need to beg for money?
We can’t create wealth because previously created wealth is using influence over government to prevent competition and the creation of new wealth. It happens on both sides of the aisle, and it does not just affect policy, it defines policy.
As long as we keep arguing left vs. right, we are fighting a battle that we all lose because the people making policy don’t care about America, only their specific, often multinational, interests.

I’ve been trying to do the math … the Bush/Obama income tax cuts are worth something like $280 billion/year ($41 billion/year for the “rich”) on the ledger. So if we were to repeal them for everybody, that $1.4 trillion deficit would be $1.1 trillion. Obviously, if we raised taxes by 5x the Bush tax cuts, we would have to raise the taxes on everybody because afterward there would be no “rich” folks any more.

@Neo_ That’s why we have to go to the mattresses on growth, which this incandescent slob in the White House has done everything in his power to suppress for three years, and start dismantling the entitlement state. We’ll be like goddamned Greece in less than five years if we don’t. And we’ll still have the people who vote for a living gnawing away. With dramatic growth, though, the parasites can find work. And let the markets go to work on health care, for everyone. We’ll be healthier as medicine innovates. There could be an amazing number of insurance products if we got the rubber gloved finger out of the health care rectum and we had a national free market for those products vs. state-by-state.

@Neo_ We don’t need to balance the budget. We need to make the deficit and debt shrink relative to GDP. Contain the costs and unleash growth. And address some of the cultural problems behind the dependency culture: like encouraging free-market capitalism and family cohesion in schools, instead of socialism and postmodern dissolution.

@Neo_ Clearly this goes back beyond Bush, even prior to him, we were balancing the budget with the half trillion dollar SS surplus on the rare occasions we even did that. But you have to go back to Reagan and TEFRA, the biggest middle class (and poor) tax increase in history, and then add on the deal to “save” SS by having workers pay in several times the rate and amounts that their predecessors paid in. At almost 16%, that alone, without one penny of income taxes, would put median earners at a higher rate than median earners paid in the 50’s and 60’s (around 11% in TOTAL federal taxes). And yet, right now taxes are about 15% of the GDP, compared with a general trend around 18%. So if people making less are paying more, someone has to be paying less. It’s not to figure out, considering that in the 50’s the highest earners paid as much as 76% EFFECTIVE rate (not just marginal). Taxes have flattened out quite a bit over the last 50 years, and I am not making an assertion of whether this is a good or bad thing, but if all things were equal, would you prefer to have the high taxes on high incomes and low taxes on media incomes of the 50’s, if that could renew economic growth? (I’m not asking you to accept the premise, that will be a much harder slog) but just consider if you believed that this were the path to economic growth, would it be unacceptle to you on principle, even if you believed failing to do this doomed us to economic stagnation for the foreseeable future?